Feature: No criminal should be laughing all the way to the bank

19 August 2016

The following is a summary of a feature article that was published in Politiken on 18 August 2016.

Money laundering and tax evasion happens today in spite of banks, not because of banksBy Ulrik Nødgaard, CEO of the Danish Bankers Association

If you have followed the news in recent months, you might have a feeling that a tax haven bank account is a piece good in banks, in line with a debit card and online banking. However, this is not how it is. Banks are in fact one of the most important partners, when it comes to making sure that Danes pay the right tax. Money laundering and other forms of fraud do not exist because of banks, but in spite of them.

Danish banks are easily the sector which notifies Skat (the Danish Central Tax Administration) the most. Tax returns once meant giving up a Sunday or two and finding wage slips, receipts and account statements, but today banks collect customers’ information on income, interest expenses, pension contributions etc., and considerable resources are used in banks year after year to draft and deliver Danes’ information to Skat.

As it is difficult for black money to flow through the bank, tax evaders will naturally try to avoid having money here. Danish banks work closely with authorities such as Skat, the Danish Public Prosecutor for Serious Economic Crime and the Danish FSA in terms of tacking money laundering and other kinds of fraud.

In recent years, banks have also become better at spotting money laundering and use more resources on it than ever before: over 1,000 people are employed in our member banks and their only task is to verify that their colleagues comply with procedures required by the law on money laundering. Large sums have also been invested in strengthening internal controls in order to meet the increasing requirements from authorities. These are requirements that most customers meet down at the bank, when they need to show identification and answer questions.

It is important to emphasise that banks are not unsatisfied with the increasingly strict requirements. The banking sector is one of the most regulated sectors and we understand and respect this. Banks are such an important part of society that it is necessary impose stringent requirements on several fronts. We must also point out that the problem with tax evasion is not caused by banks or because banks do not help the authorities.

Banks work closely with the authorities and the authorities closely monitor whether banks comply with the rules and follow up on injunctions and police reports, if the rules are broken. Minimum and maximum penalties are used but the bank’s damaged image is often the largest penalty, as tax evasion, quite rightly so, awakes large feelings and reactions amongst the population. Can we as a sector promise that there will not be any injunctions in the future? No, but we will do our utmost to achieve our ambition, which is to completely avoid this.

It is important to remember that Danish banks do not have tax evasion as part of the business model. If a customer wishes to use company constructions aimed at tax evasion, they will be turned away at the bank. In the Panama Papers case, there were no examples of the Danish state being deprived of billions or millions. This has been confirmed by Skat, the Minister for Taxation, the Minister for Business and Growth and the Danish FSA.

The rules on money laundering stem largely from EU regulations. The current rules will be replaced by more comprehensive regulation from the EU and the Danish implementation is currently out for consultation. The Danish Bankers Association has drafted a new law on money laundering, supplementing the already tough legislation with a range of new initiatives that set even higher demands for monitoring money laundering.

It is important to remember that no matter how many staff we set on money laundering cases and no matter how much legislation is implemented to combat money laundering, people will always find a way to cheat the system.

The Danish Bankers Association encourages better international cooperation in combating money laundering. This is a joint, international task. We need something that connects all of the transactions that banks notify. A good example is Skat’s Project Money Transfer, where banks delivered raw data which resulted in over DKK 1 billion being sent back to the Treasury.

The debate on money laundering and tax evasion is far too big to simply be reduced to saying that it is the banks’ fault. We mean it, when we say that we will take societal responsibility. But we also need to create a joint front and ensure that the enormous work we carry out will actually change something.